U.S. Gives China More Time on Yuan

WASHINGTON —  The Bush administration announced Wednesday that it would not brand China as a country that was manipulating its currency to gain unfair trade advantages.

The decision came in spite of growing pressure in Congress to take punitive action to deal with a U.S. trade deficit with China that hit a record $202 billion last year.

Treasury Secretary John W. Snow did say he was “extremely dissatisfied” with the pace of China’s currency reforms.

A designation as a currency manipulator would trigger consultations between the two nations and could lead to trade sanctions if the United States won a case on the issue before the World Trade Organization.

The administration contends that it can make more progress by lobbying China to make changes than by bringing a WTO case. It has been raising the issue with more intensity over the last three years.

American manufacturers contend that China has been artificially keeping its currency devalued by as much as 40% against the dollar, giving Chinese manufacturers a huge competitive advantage against U.S. products.

However, the administration said in the latest currency report to Congress that it did not believe China technically met the definition in the law of a currency manipulator.

After the announcement, two U.S. senators who have criticized China’s foreign exchange policy said they would not seek punitive trade legislation against Beijing before Sept. 30 to give China more time to improve.

“If we don’t have action by Sept. 30, we’re going to vote and it will unleash forces that I think need not be unleashed,” Sen. Lindsey Graham (R-S.C.) said.

Sen. Charles E. Schumer (D-N.Y.) said, “We’re willing to give them a chance.”

A bill sponsored by Schumer and Graham would impose 27.5% punitive tariffs on all Chinese imports coming into the United States unless China moved more quickly to allow the yuan to rise in value against the dollar.

Other critics of China’s trade policies were quick to attack the decision.

“By failing to designate China as a manipulator in this report ... the United States comes off as a paper tiger unwilling to stand up for its domestic industrial sector,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, which represents U.S. textile and clothing companies.

“Secretary Snow has been consistently rolled by the Chinese government in his years-long but unsuccessful effort to get China to take action on its highly undervalued currency,” said Kevin Kearns, president of the U.S. Business and Industry Council, which represents many medium and small-sized manufacturing companies.

The report noted that China announced in July that it was abandoning a fixed link of the yuan’s value to the dollar, although since then the yuan has risen in value by only about 3%.

“We are extremely dissatisfied with the slow and disappointing pace of reform of the Chinese exchange rate regime,” Snow said.

“We are not satisfied with the progress made on China’s exchange rate regime and we will monitor closely China’s progress every step of the way,” the Treasury secretary added.

The currency report, which the administration must present to Congress every six months, was delayed by a few weeks, until after Chinese President Hu Jintao and President Bush discussed the currency dispute during a White House meeting April 20.

The administration had hoped that Hu would signal China would move faster to allow its currency to rise in value against the dollar, but no such announcement came out of the half-day summit.